Thirty Four States Can’t Fund Expenditures With IGR- BudgiT

Rivers State has topped BudgIT’s 2024 fiscal performance ranking for Nigerian states, with Cross River and Kwara entering the top five, while Ebonyi and Kaduna exit the elite rankings.

Jigawa State fell to the bottom, replacing Zamfara, according to BudgIT’s latest State of States Report themed “Moving Healthcare Delivery from Suboptimal to Optimal.”

The report evaluates states’ fiscal health and sustainability based on metrics like revenue generation, debt sustainability, and capital expenditure prioritization.

BudgIT noted that both Rivers and Lagos were the only states able to fully fund their operating expenses through internally generated revenue (IGR), with Rivers achieving a 121.26 per cent IGR-to-operating expense ratio and Lagos at 118.39 per cent.

Kebbi State recorded the most significant improvement, climbing 12 spots to 26th, while Jigawa saw a sharp decline, dropping 16 places to 36th. Most other states depend heavily on federal transfers, with 32 states relying on federal allocations for over half their revenue.

The report highlights a 31.2 per cent increase in combined revenue for all states, rising to N8.66trn in 2023 from N6.6trn the previous year.

This growth outpaced the previous year’s 28.95 per cent rise, driven by increased federal allocations and IGR, largely due to the end of Nigeria’s fuel subsidy. Lagos contributed the largest revenue share at N1.24trn or 14.32 per cent of the total.

In terms of expenditures, states’ total spending reached N9.78trn, up 21.19 per cent from 2022. Personnel and overhead costs grew by 12.9 per cent and 26.75 per cent, respectively, with capital expenditures seeing the most substantial increase at 37.3 per cent.

The report underscores the rising debt burden, with state debt climbing 38.1 per cent to N10.01trn by year-end 2023.

Rising exchange rates intensified the burden on states with significant foreign-denominated debt, with Lagos alone holding $1.24bn in foreign debt, 26.9 per cent of the national total.

On healthcare, BudgIT reported that while the states allocated a total of N2.3trn to health in 2023, only N1.39trn was spent. Some states did not record any spending on essential medical equipment, underscoring a shortfall in healthcare investments.

The report calls for improved resource management, debt transparency, and a shift from foreign loans to stabilize finances amid exchange rate fluctuations.

BudgIT’s findings reveal gaps in healthcare infrastructure, with the national doctor-to-patient ratio at just 1:10,000—far below the WHO recommendation. Infectious diseases like malaria, cholera, and tuberculosis continue to pose challenges, especially in northern states, with Borno recording over half a million malaria cases in 2023.

BudgIT’s Head of Research and Policy, Iniobong Usen, emphasized that states must mobilize internal resources and establish partnerships to support debt management and sustainable infrastructure investments.

“The fiscal viability and long-term sustainability of states heavily depend on their capacity to mobilise revenues internally by effectively leveraging their natural resource endowments, technology, public-private partnerships, human capital, and effective consequence management.

“This capacity is crucial for financing essential infrastructure, investing in human capital development and social protection, meeting the new minimum wage and its consequential adjustments, and repairing the fractured social contract.

“To achieve debt sustainability, states must also curb their reliance on foreign loans, especially in light of exchange rate volatility and shrinking fiscal space, to minimise exposure to unfavourable exchange rates.

“Additionally, states should establish robust frameworks for debt transparency and accountability, ensuring that borrowed funds are allocated to high-impact projects with clear economic returns,” said Usen.